KBRA Assigns Ratings to the Falcon 2019-1, LLC Class A-1, A-2, B, C, and D Notes and Assigns a Preliminary Rating to the Falcon 2019-1, LLC Combination Notes
Kroll Bond Rating Agency (KBRA) assigns ratings to five classes of notes issued by Falcon 2019-1, LLC (Falcon 2019-1). KBRA is also assigning a preliminary principal only rating to the Combination Notes expected to be issued by Falcon 2019-1 after the closing date.
Falcon 2019-1 is a delayed-draw middle market cash flow collateralized loan obligation (CLO) managed by Crescent Capital Group LP (Crescent or the collateral manager). The CLO will have a four-year reinvestment period and the legal final maturity is November 2031. The ratings reflect initial credit enhancement levels, excess spread, four levels of coverage tests including overcollateralization ratio and interest coverage tests.
The collateral in Falcon 2019-1 will be originated through Direct Lending, Private Credit, Middle Market strategies at Crescent that are expected to be equally weighted. The notes will fund reverse-sequentially (initially via the Subordinated Notes and sequentially up through the Class A-1 Notes). As debt is drawn to ramp the portfolio to the target $150.0 million, a pre-determined matrix will govern minimum portfolio credit quality (K-WARF) based on the weighted-average spread (WAS) and weighted-average recovery rate (WARR) of the portfolio.
The collateral manager is Crescent Capital Group LP, founded in 1991 and headquartered in Los Angeles, California. Crescent is an independent credit firm with over 25 years' experience in below investment grade credit with offices in London, Boston, Los Angeles and New York. The investment team is made up of more than 80 investment team members and more than 85 operations and administrative team members. Over 50 investment professionals are dedicated to the private credit platform. The private credit platform launched in 1993 and has deployed over $18 billion including $5 billion through direct lending. The investment team has 15 years' experience in direct lending and utilizes strong sponsor and referral relationships to source collateral. Crescent's direct lending strategy focuses on the "lower"-middle market, defined by companies with EBITDA between $15-25 million.
KBRA's ratings on the Class A-1 and A-2 notes represents timely payment of interest and ultimate payment of principal by the applicable stated maturity date. KBRA's ratings on the Class B, C, and D notes represent ultimate payment of interest and principal by the applicable stated maturity date.
KBRA's preliminary rating on the Combination Notes is a principal only rating, which represents ultimate payment of the initial amount by the legal final maturity. The Combination Notes are expected to hold the following components:
Class |
Notional Amount of Component |
Class A-2 |
$15,000,000 |
Class B |
$10,000,000 |
Class C |
$8,000,000 |
Class D |
$9,000,000 |
Subordinated Notes |
$15,470,000 |
The rating on the Combination Notes will be a preliminary rating as of the closing date. The Combination Notes are expected to be issued after the closing date and after the A-2 Notes are fully funded at the earliest.
KBRA analyzed the transaction using Global Structured Credit Rating Methodology published on August 7, 2018 and the Global Structured Finance Counterparty Methodology published on August 8, 2018.
The ratings are based on information known to KBRA at the time of this publication.
Class |
Commitment Amount |
KBRA Rating |
Certificate Type |
Class A-1 |
$78,000,000 |
AAA (sf) |
Principal and Interest |
Class A-2 |
$15,000,000 |
AA (sf) |
Principal and Interest |
Class B |
$10,000,000 |
A (sf) |
Principal and Interest |
Class C |
$8,000,000 |
BBB (sf) |
Principal and Interest |
Class D |
$9,000,000 |
BB (sf) |
Principal and Interest |
Class |
Initial Amount |
Preliminary Rating |
Certificate Type |
Combination Notes |
$57,470,000 |
BBB- (sf) |
Principal-only |
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- AIG CLO 2019-2 New Issue Report
- Structured Things: The Upside-Down Yield Curves
- KBRA's Structured Credit 101: Collateralized Loan Obligations
- KBRA's Structured Credit 401: Primer on Combination Notes
- Global Structured Credit Rating Methodology
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About KBRA and KBRA Europe
KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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